A
shell game keeps regulators from considering all the options
for Cohoes Falls

It’s
been more than a year since the Federal Energy Regulatory
Commission approved a new 40-year license for the School Street
hydropower plant on Cohoes Falls, but the license is still
under dispute. Despite widespread bipartisan support for FERC
giving formal consideration to an alternative plan proposed
by the Green Island Power Authority, FERC insisted that its
hands were tied by its own rules [“Falls Guys,” Metroland,
June 9, 2005].

GIPA’s plan would generate more electricity, put more water
over the falls, and appears to be more environmentally friendly
on a number of counts. However, FERC said that they applied
too late: Federal law says competing applications should be
filed at the same time as renewal applications, which would
have meant GIPA should have filed between 1988 and 1991, when
the original license was up for renewal. School Street’s license
was the last of a long set of laborious settlements that FERC,
the owners, and concerned parties negotiated one at time,
which is why it was nearly two decades between the close of
the application period and the issuing of a new license.

GIPA currently is challenging the licensing decision in United
State Court of Appeals for the Second Circuit. One of its
main arguments has been that in approving this license, FERC
violates its obligations, as described in the historic Scenic
Hudson decision, to consider alternatives and affirmatively
guard the public’s interest. So much time has elapsed, GIPA
argued, that new information and even new technology have
surfaced, and FERC simply cannot make a good decision without
taking them into account.

“In
all environmental reviews, when information comes in to the
record, it has to be considered,” said Warren Reiss, general
counsel for Scenic Hudson, which is filing an amicus brief
in the appeal. “FERC is putting form over substance here.”

But it’s questionable whether FERC’s portrayal of itself as
just going by the rules is accurate. For example, there’s
the matter of who owns the plant. Since Niagara Mohawk sold
the plant in 1998, the owner of record has been Erie Boulevard
Hydropower LP. FERC granted a special approval to transfer
the applicant from NiMo to Erie, without requiring that Erie
resubmit the application section that explains who the company
is and how the public interest will be served by its proposal.
According to FERC, that was the last time the plant’s ownership
changed.

Even Brookfield, a Canadian energy company that owns dozens
of hydroplants in New York state and is the current general
partner of Erie, agreed with GIPA that that’s not true. “It
went from Niagara Mohawk to Orion [an investor group], then
Reliant Energy,” explained Thomas Uncher, spokesperson for
Brookfield, who replied to a query directed at Erie’s lawyer.
“Brascan bought it from Reliant. The close was in September
2004. After that Brascan to Brookfield was just a name change.”
He never used the name Erie Boulevard.

How did regulators miss this? Well, Erie has remained the
owner of record the whole time. It is a limited partnership,
rather than a corporation, and all of these sales took place
by changing its general partners.

Both FERC and the New York state Department of Environmental
Conservation, which issued the water-quality permit necessary
for the relicensing to proceed, issued no public notices,
conducted no official reviews, and required no new filings
from the new owner when these partners changed, though that
would usually follow a change in permit or license applicant.
(DEC and FERC declined to comment.)

In most states, when a partner leaves or joins a partnership,
that partnership is considered to have dissolved and re-formed,
though that’s not so under famously corporate-friendly Delaware
law, under which Erie is registered. Still, government agencies
have the latitude to make their own assessments about what’s
considered a transfer of ownership. Regulatory agencies usually
err on the side of caution in these cases, with purchase of
as little as 10 percent of the shares in a corporation requiring
the approval of a banking regulator, or a change from 49-to
51-percent ownership often considered a change in ownership
for a nuclear plant.

FERC’s policy is to consider each possible ownership transfer
on a case-by-case basis. And, say D.C.-based energy attorney
Carolyn Elefant and others familiar with FERC, they don’t
usually look behind a shell corporation to see if its actual
members are changing, even though case law says FERC has the
right to “pierce the corporate veil” of potential licensees.

This is significant, in terms of GIPA’s quest to get its proposal
considered, because if a plant’s ownership is ruled to have
changed, according to the Federal Power Act, that’s considered
a material amendment to the application, meaning public notice
should be reissued and motions entertained. Jim Besha, the
engineer who developed GIPA’s alternative, said that would
be an opportunity to make a motion that Erie’s application
is “12 years stale, under different owner, and a different
proposal, because they changed the capacity several times,”
and push for the proceedings to be reopened to competing applications.

Beyond that, however, if regulators have not recognized that
the entity holding the license for the Cohoes Falls plant
has changed hands, it raises serious questions about the quality
of their own due diligence. As Marc Gerstman, GIPA’s counsel,
wrote in a January 7, 2008 letter to DEC: “If the DEC is not
informed of the new owners, and such information is not publicly
available how can the Department . . . be assured of the financial
suitability or record of compliance history of any such new
partners and therefore, the limited partnership as a whole?”

Several lawyers not involved in the case agreed. “In terms
of whether an entity should be able to create a shell and
swap the people behind it to hold control of a site,” said
Elefant, “it’s questionable whether [under those conditions
FERC] is able to carry out its obligation to ensure that a
license is in the public interest.”

In fact, if FERC doesn’t consider Erie’s obvious and wholesale
partner changes to qualify as a change in ownership, that
raises questions far beyond Cohoes Falls. How many of the
actual owners of the hydropower plants under FERC’s purview
all over the country have not actually been vetted?

It’s hard to know, said Don Garner- Gerhardt of Wisconsin
Strategies, who worked on several relicensing projects in
Wisconsin when he was on Democratic Congressman David Obey’s
staff. “FERC is grossly understaffed,” he said. “Under this
administration particularly . . . they’re not real aggressive
about pursuing anything that’s going to impact big companies.”

—Miriam
Axel-Lute

www.mjoy.org

What
a Week

Put
It Out

Beijing
officials announced that they will move forward
with laws that ban smoking from most public spaces
in the smog-choked China capital. This is an effort
to further reduce pollution in preparation for
the summer Olympics, an effort that China reportedly
has spent $16 billion on over the past decade.
Experts worry that endurance games held in the
polluted air will place world-class athletes in
danger, as commuters regularly wear face masks
just to travel to work. The ban will go into effect
May 1.

Just
Like Old Times?

Lawmakers
didn’t exactly make the deadline for the state
budget this week, but they came pretty damn close,
thanks to that newfound sense of teamwork so ballyhooed
at the Capitol. And practically all the top dogs
inside the government and at concerned good-government
groups agreed: Considering the seismic disruption
of Eliot Spitzer’s explosive scandal and speedy
resignation, having the budget done anywhere near
ontime was a miracle. Or was it? Some critics
worry that the new governor, David Paterson, was
too willing to slip back into the three-men-in-a-room
style of politicking that dominated New York state
for decades. Isn’t there usually reason to worry
when career politicians like Sen. Joe Bruno (R-Brunswick)
and Assemblyman Jim Tedisco (D-Schenectady) seem
so happy?

Google
Is Watching You

Google
is an insatiable beast, constantly forging new
revenue streams, and the Internet Goliath has
staked out a new claim: government. The San
Francisco Chronicle reported that Google has
been working with the government’s top intelligence
agencies—CIA, FBI, National Security Agency, and
others—to create a super-secret Wiki, called Intellipedia,
through which sleuths are able to share data.
The paper reported that “agents can log in, depending
on their clearance, to Intellipedia’s three tiers
of service: top secret, secret and sensitive but
unclassified. So far, 37,000 users have established
accounts on the network, which contain 35,000
articles encompassing 200,000 pages.” This is
part of a broader Google strategy, the article
claimed, to attract those overflowing government
dollars, incorporating its powerful search capabilities
into all levels of government.